Hong Kong funds offer new yuan investment dishes

European money manager Amundi Asset Management and DBS Bank are leading the way with renminbi-denominated units in their funds, providing a new investment channel to investors holding the Chinese currency.

Making a yuan share class available on funds whose underlying assets are not denominated in the Chinese currency encourages international use of the yuan and also opens up a potential lucrative investor base for these funds.

“We see the demand increasing for yuan investments both from institutional and retail investors,” said Zhong Xiaofeng, Chief Executive Officer of Amundi North Asia.

The yuan share class in Amundi’s newly-launched equity dividend fund will invest in stocks in the Asia-Pacific region.

DBS Bank (Hong Kong) said last week it had launched the RMB-hedged share class of the Schroder Asian Asset Income Fund, providing investors access to an Asian-centric asset allocation.

As China prepares to promote the numerous free trade zones on the mainland to boost global use of its currency, Hong Kong is making efforts to launch new products to keep its edge intact while promoting itself as a global money management hub.

Growing dim sum bonds, named after the bite-size delicacies served in Hong Kong teahouses, saw not only the first issue from a foreign regional government, but a debut of a floating-rate bond with reference to the newly-launched CNH Hibor this month.

“Hong Kong needs to be able to provide more asset classes for RMB investors and if it doesn‘t, I think Hong Kong is going to lose comparative advantages,” said Ayaz Ebrahim, chief investment officer, Asia ex-Japan equities of Amundi Hong Kong.

The size of Hong Kong’s offshore yuan bond market is about 293 billion yuan ($48.10 billion) and the amount of yuan deposits in Hong Kong banks was 730 billion yuan at the end of September, latest data from the Hong Kong Monetary Authority showed.